In general, mortgage providers like to lend to applicants with straightforward incomes. If you’re on a high salary and receive monthly payments straight into your bank, mortgage providers will probably be falling over themselves to offer you a loan. However, like This Is Money says, “Lenders are far less willing to take what they see as a risk on those with a ‘non-standard’ income.” So, if you’re self-employed, receive your income in dividends, or rely on overtime, bonuses and allowances – mortgage providers are often a little more wary about doling out the cash.
For government workers, this can be a real issue. With many taking a percentage of their income from allowances, putting a mortgage application together isn’t always easy. Luckily, securing a mortgage is not impossible. All you need is a little expert know-how.
What are allowances?
Allowances are often given to government employees to cover essential expenses incurred as part of their duties. For example, members of the House of Lords can claim up to £300 for every day they attend the House and undertake parliamentary work, while MPs are also entitled to a number of allowances. Members of the Civil Service who work abroad are often paid, at least in part, in allowances, with essentials like rent, food and travel often covered by the Government.
Though allowances are good news for your income, they can make applying for a mortgage more difficult. This is especially true if you only receive allowances sporadically as lenders may be reluctant to take them into account when calculating the amount you can borrow.
How do allowances affect a mortgage application?
Exactly how the allowances you receive will affect your mortgage application will depend on the lender you choose and the way your finances are structured. Some lenders may be willing to take a percentage of the allowances you claim into account when calculating your mortgage. Others may be unwilling to consider them as part of your income.
The best way to ensure you can still get the mortgage you want is to talk to an expert financial advisor. They’ll be able to tell you exactly what your allowances mean for your income and your application. They may also be able to give you advice that gives you a better chance of success.
To find out more about how your allowances may affect your mortgage application, give us a call and speak to one of the expert members of our team today.
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Written by: Andrew Page